Audit Procedures - EDP audit

The strategic focus of most tax administrations contains reference to voluntary compliance and risk management as measures of success. One of the most effective tools for measuring these is the tax audit. Audit provides the administration with feedback on how effective or otherwise their policies are working and also provides vital statistics that can be used to gauge the tax gap.

Audit has been a constituent part of tax administrations’ activities since time immemorial. The difference nowadays is that accounting procedures and techniques have developed out of all proportion to what was acceptable even some twenty years ago and the auditors’ skills have had to adapt along with them.

With the advent of reasonably priced “off the shelf” IT based accounting software being used by the Small to Medium sized Enterprises (SMEs) along with highly complex Enterprise Resource Planning systems (ERP) being adopted by virtually all large businesses meant that tax authorities had no choice but to invest in the education of their auditors in computer assisted audit techniques and the use of audit software. The advantages that came from this general move to electronic accounting was that the auditor could now, with the right skills, examine virtually 100% of the transactions in less time than it took to examine a small, randomly selected number, using the old “tick and turn” technique. This lead to more comprehensive audits whilst occupying less time at the business premises and causing less disruption to the taxpayers activities.

As part of the IOTA Area Group activities into large taxpayer treatment and audit it was decided that members should be approached to determine how their administration was addressing the issues of EDP Audit. Twenty three IOTA Member administrations responded to a questionnaire on the subject and this report summarises the findings.

Particular thanks for the work carried out must go to Mr. Wojech Madera from Poland who compiled the findings, as well as to the other task team members: Ms. Iveta Spickova, Czech Republic, Mr. Aubert Esquibet, France, Ms. Karina Tomaseva, Latvia, Mr. Ramunas Vaisnoras, Lithuania and Mr. Oleksiy Shmatko, Ukraine. In addition, special thanks should be extended to the European Commission’s Directorate-General Taxation and Customs Union and its E-Audit Project Group for their kind permission to reproduce their E-Audit Road Map as part of the available information to IOTA Members.

Related Core Issue : 
Improving Taxpayer Compliance and Tax Collection
Reducing the Tax Administration Cost Base
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